Warren Buffett says:
people get interested in stocks when everyone else is. The time to get
interested is when no one else is. You can't buy what is popular and
Having good Stock Trading Platforms is absolutely necessary.
O.K. So you're now convinced that
managing your own Pension is the way to go, you now need to select the
There really is a mammoth choice here. Most of them are pretty much the same but, for us, it comes down to reliability and running costs.
If we were to trade infrequently, say once every 6 months, then trading costs might not be a consideration.
However, if we were trading several times in a week (which sometimes we do), then trading costs could be a consideration.
Then there is the cost of simply maintaining your Retirement Plan.
You obviously want all costs to be as low as possible but you also want flexibility.
There are basically three kinds of portfolio you could have in your pension:
If you've read and understood anything on this website the first two are a no, no.
We favour having an adventurous portfolio for your pension.
Accepting a higher risk does not mean being reckless. If you follow the various sections on this website you will get the idea.
When you start investing, you will require a suitable means for placing your orders.
Long gone are the days when you make a phone call to your broker (although that is still practiced, but it's an extremely expensive, and a rare, way to trade).
As a stock trader for your retirement pension all your trades will be done online with the use of your pension provider's software - or platform as it is commonly referred to.
software is not to be confused with 'Stock Trading Software' (this is
covered elsewhere on this website and is intended for active traders).
'Stock Trading Software' for analysis will not be required for people who
do not trade on a regular basis.
Whatever level of activity you have with your pension investments you WILL require the 'Stock Trading Platform' that your DIY pension provider makes available. Most of these platforms offer a basic level of stock evaluation. Which, if you are an infrequent trader, will be more than enough for you.
There are a plethora of DIY Stock Trading Platforms in the UK.
We haven't had experience in all of them (obviously) however, they all function in much the same way.
But they do differ in the charges they slap on.
The DIY Trading Platform that we use is probably not the best. But if you haven't had experience of all of them (impossible to do) when choosing, it's more a case of "does it tick all of the boxes?"
We have found that Hargreaves Lansdown, although not perfect, ticks most of the boxes.
AJ Bell Youinvest would do the same.
Here is our list (in alphabetical order) of the most common DIY providers:
A lot to choose from. There are more, but the above list is enough for cosideration.
Best recommendation is to send off for their literature and call them up with your questions. Maybe ask the same questions to all of them.
Keep an eye on costs. There are some substantial differences.
How much does it cost to trade shares?
Is there a charge for drawdown?
What are the annual charges?
What would it cost to transfer to another provider should you be dissatisfied for any reason, or for no reason at all?
We couldn't possibly answer that question in fairness.
We can only give you our opinions. Which are:
Hargreaves Lansdown (HL) is the largest (by far). Their dealing charges depend on how often you trade. Make 9 trades per month and the cost comes down. This is almost halved if you were to trade over 20 times a month.
But ... a word of caution, trading too much can be dangerous, especially if done over the long term. Your dealing costs will add up. This is called over-trading or churning. Frequent trading is rarely a good strategy. But, there are always exceptions.
AJ Bell 'scored' well in our investigations. On a parr with HL we reckon.
The Share Centre had two pricing options for dealing but their costs started to get complicated.
As far as customer service was concerned, research firm Platforum rated HL and AJ Bell well whilst others were less so. Very similar to our own findings!
So ... do your own due diligence when it comes to choosing a SIPP provider. Look VERY carefully at their charges.
There are 3 main charges to consider when choosing a SIPP provider. Namely:
But choosing your "ideal" SIPP provider is not easy. It's not just about charges. For example, would you like to be able to trade from a Smartphone app? And if so, does your preferred SIPP provider offer one?
When pension freedoms became law in 2015 you are now not just limited to buying an annuity with your pension pot. There are now 4 ways in which you can access your pot when you reach the earliest retirement age of 55 (to be raised to 57 by 2028).
The first of these is through an annuity. An annuity is a financial product that allows you to purchase, through an insurance company, an income that lasts for the remainder of your lifetime. [See also Annuity].
The amount of income you would receive obviously depends on the size of your pension pot and also on your personal circumstances - health, etc.
It's extremely arguable whether annuities are a good buy. Someone must have thought not, hence the new legislation in 2015.
The big disadvantage of an annuity is that it only lasts for a lifetime (or joint lifetime if you were to decide on a reduced annuity by including your spouse). That is, you could have a pension pot of hundreds of thousands, take out an annuity, and sadly, die the next week.
Another disadvantage of annuities is low interest rates. At the time of writing, we live in an era of low interest rates, which means, low annuity rates. Annuities are just not attractive anymore. But - it's personal choice.
The big advantage of an annuity is that if you don't die prematurely and live a healthy long life, you will receive your income right until the day that you do leave this world, which clearly means that you receive more annuity income than your pension pot has accrued.
However, thanks to new laws, there is an alternative to having to purchase an annuity - drawdown.
Under current legislation, you can upon retirement age (or any time thereafter), take a 25% tax free lump sum from your pension and access the rest of your pension pot in any time frame of your choice. Accessing the rest of your pension pot is, unfortunately, taxable [but it's still a good dealand contributions throughout your lifetime have been tax efficient].
A third way you can access your pension pot after retirement age is known as "uncrystallised funds pension lump sum."
What does that mouthful mean?
Roughly, it means that your pension pot remains in tact depending on how much you have taken out (25% tax free element and any additional withdrawals).
Which means that your pension pot can still grow and you can still withdraw funds, either on a regular basis, or on an ad hoc basis.
In the main, drawdown has the best of both worlds. Access to money when you want (or need) it, and the ability of your remaining fund to continue to grow.
One disadvantage, is that you may drawdown too much money and reduce your pension pot to zero. It is down to the individual to prevent this from happening. There is no law in place that prevents this from happening.
And lastly, there is a fourth option. You can take from your pension pot a mixture of both lump sum and an annuity.
"What The 10 SIPP Providers Offer
and Their Charges?"
Select any of the 10 SIPP providers we have identified to get an idea of what they have to offer:
There you go.
10 SIPP providers to choose from.
Study what they have to offer, carefully, and choose 2-3 to take a really close look at.
For us, charges would be a major factor in our choice. But flexibility and ease of use is right up there as well.
You certainly don't want a Stock Trading Platform that is hard work. An intuitive platform is what you need - even if their charges are a wee bit higher.
We can't recommend anyone, but we used Hargreaves Lansdown and were not disappointed.
It would be inconceivable to us for a SIPP provider not to offer a mobile app. In this age of technology, having a mobile app is an absolute necessity. Make sure that whichever Stock Trading Platform you choose, it offer a mobile app.
Like in most things in life - do your due diligence and you should be fine.